Asian Monetary Integration - IMF eLibrary...Integration: Will It Ever Happen?" at the Marina Mandarin Hotel in Singapore on September 17. The event was jointly organized by the Per

Asian Monetary Integration:Will It Ever Happen?

Tharman Shanmugaratnam

2006

©International Monetary Fund. Not for Redistribution

ISSN 0252-3108

Editor: Archana KumarComposition: Alicia Etchebarne-Bourdin

Cover design and production: IMF Multimedia Services Division

The Per Jacobsson lectures are available on the Internet atwww.perjacobsson.org. Copies of the Per Jacobsson lectures maybe acquired without charge from the Secretary of the Foundation.


www.perjacobsson.org

Contents

Foreword

Opening RemarksAndrew Crockett

Asian Monetary Integration: Will It Ever Happen?Tharman Shanmugaratnam

Appendix: Supporting Data

Questions and Answers

Biography

The Per Jacobsson Lectures

The Per Jacobsson Foundation

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Foreword

The second 2006 Per Jacobsson Foundation Lecture was de-livered by Tharman Shanmugaratnam, Singapore's Minister forEducation and Second Minister for Finance, on "Asian MonetaryIntegration: Will It Ever Happen?" at the Marina Mandarin Hotelin Singapore on September 17. The event was jointly organizedby the Per Jacobsson Foundation and the Association of Banks inSingapore. Sir Andrew Crockett, Chairman of the Board of the PerJacobsson Foundation, chaired the event.

The Per Jacobsson Foundation lectures are held annually onthe occasion of the Annual Meetings of the International Mon-etary Fund and the World Bank. From time to time, an additionalevent is also organized in conjunction with the Bank for Interna-tional Settlements in Switzerland. The Per Jacobsson Foundationwas established in 1964 to carry forward the work of internationalcooperation in the monetary and economic field to which PerJacobsson, the third Managing Director of the IMF, had devotedhis professional life. The main purposes of the Foundation are tofoster and stimulate discussion of international monetary prob-lems, to support basic research in this field, and to disseminatethe results of these activities.

Further information about the Per Jacobsson Foundation maybe obtained from the Secretary of the Foundation or may befound on the website, www.perjacobsson.org.

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Opening Remarks

ANDREW CROCKETT

Delegates, honored guests, ladies and gentlemen, it is my plea-sure, on behalf of the Per Jacobsson Foundation, to welcome youto this Per Jacobsson Foundation Lecture. Over the past 40 yearsor so, this lecture has become a fixture of the Annual Meetingsof the International Monetary Fund and the World Bank, and wehave been privileged to have a very distinguished range of speak-ers. Per Jacobsson, as many of you know, was the third ManagingDirector of the IMF and, prior to that, the Chief Economist of theBIS. He was a very distinguished member of a long line of distin-guished Managing Directors.

Also, on behalf of the Foundation, I would like to express ourappreciation for the generous support for this event provided bythe Association of Banks in Singapore, and I am delighted thatthe Chairman of the ABS, Mr. Wee Ee Cheong is with us today,sitting here in the front row, along with a number of other repre-sentatives of the Association.

It is a particular pleasure for me to introduce Tharman Shan-mugaratnam, universally and more simply known as Tharman,who has been a friend and colleague of mine for a number ofyears. Many of you will know him: he is extremely well knownin Singapore. Much of his career was spent with the MonetaryAuthority of Singapore, but he has given very distinguished servicealso in education and finance. I think one could say, looking at hiscareer—starting with his academic qualifications at Cambridge Uni-versity, the London School of Economics, and Harvard, where hewas cited as a Littauer Fellow—that he has focused on these areas.And he is now, as most of you will know, involved both in educa-tion, through his role as Minister for Education, and in finance as

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Second Minister for Finance. I think you call that "double-heading"in Singapore.

Tharman entered politics five years or so ago and has subse-quently been reelected, and, as a political representative, he hasbeen and is a minister in the government.

I think you will agree with me that his distinguished back-ground, academically and in public life, fit him extremely well togive the Per Jacobsson Foundation Lecture as the latest in a lineof distinguished speakers, and to address us this afternoon on thesubject of "Asian Monetary Integration: Will It Ever Happen?"

Tharman.

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Asian Monetary Integration:Will It Ever Happen?

THARMAN SHANMUGARATNAM

Mr. Crockett, Mr. Van Houtven, Mr. Wee Ee Cheong, distin-guished guests and friends—and I do see many friends in theaudience—first of all, let me say that it is my privilege to be givingthis lecture. I come after a long line of much more distinguishedspeakers, and I really feel honored that Andrew and others invitedme to deliver this talk today.

INTRODUCTION: THE CHANGING PREMISES OF THE DEBATE

The last Per Jacobsson Lecture in Asia was in 1997. Mr. JosephYam, Chief Executive of the Hong Kong Monetary Authority, spokeon a topic broadly similar to what I am speaking on today, which isAsian monetary integration or, as he put it at the time, Asian mon-etary cooperation. September 1997 was at the onset of the Asiancrisis. Since then, there have been major changes and considerableevolution in the debate on Asian monetary integration.

The Asian crisis proved deeper than anyone could have fore-seen in September 1997. It has left a scar on the minds of Asianpolicymakers. But the recovery from the Asian crisis has also beenrobust, a recovery that is founded on structural reforms that wereput in train as a result of the Asian crisis. Exchange rate regimeshave evolved. They are by and large more flexible. Capital controlsand restrictions—some had been in place for a long time, somewere put in place during the crisis—have been eased. And tradeand investment are proceeding apace. The region is increasinglyintegrated in trade and investment and, to a lesser extent, in finan-cial flows.

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So Asia today is a very different place from 10 years ago.The original motivation for proposals for Asian monetary

integration—which started off as proposals for an Asian mon-etary fund and a parallel set of proposals for an Asian currency,that is, a common currency or monetary union—had to do witha desire to reduce Asia's susceptibility to shocks, particularly fi-nancial shocks. There was also a broader sense that Asia had tobe more self-reliant and gain fuller control over its destiny. Andthis broader sense reflected, in part, a discomfort at the time withwhat was known as the Washington Consensus, and a particulardiscomfort over the role of the IMF in the Asian crisis. Monetaryunion was in some ways a metaphor for Asia wanting to manageits own affairs.

But Asia has evolved. Asia has recovered. While the crisis re-mains in our minds, we are no longer in crisis. The WashingtonConsensus, although of course never a fixed or clearly identifiedset of views, has also been refined over the years. The conven-tional wisdom, whether at the IMF or in academia or in policy-making circles in the West, has evolved. There is greater circum-spection with regard to optimal exchange rate regimes, greaterrecognition of the merits of intermediate solutions—as distinctfrom corner solutions—in exchange rate policy. There is a morenuanced view on the merits of capital controls and restrictions inspecific circumstances. And there is a much sharper recognitionof the need for financial market stability during periods of struc-tural reform and, in particular, of the need to avoid precipitatingfinancial panic.

Not surprisingly, the objectives and motivations behind the con-tinuing debate for Asian monetary integration have also evolved.The objectives are no longer defensive, no longer preoccupiedwith crisis prevention or resolution. They are now more forwardlooking. The objectives are about growth, about greater trade in-tegration, about spurring greater cross-border flows of investmentwithin Asia, and about promoting the integration and deepeningof financial markets.

It will be useful, before I address directly the issues involvedin Asian monetary integration, for us to take stock of how we arefaring in trade integration and financial integration, respectively,because these are the ultimate objectives of the proposals thatwe have before us on monetary integration. Whether what is



proposed is a common currency or a parallel currency or manag-ing Asian currencies against a common basket of currencies, theobjective is to promote trade and financial integration so as toenhance economic welfare.

ASIAN TRADE INTEGRATION IS DRIVEN BY ASIA'S

INTEGRATION WITH THE WORLD

First, let us take a look at trade. Intraregional trade in Asia isalready rather high. No one expected it to get to this point soquickly. In 1980, intraregional exports were about 34 percent oftotal Asian exports. That proportion is now 50 percent—not sodifferent from among the member countries of the North AmericaFree Trade Agreement (NAFTA), although still below Europe,where it is about 61 percent or so, and certainly below Europe atthe time of formation of the European Union (EU), when intra-regional trade was about 65 percent of total trade.

At 50 percent, a big chunk of Asia's trade is now already intra-regional. But it is fundamentally different in nature from Europe ina number of respects. Intraregional trade in Asia has been drivenfrom bottom up, by the activities of firms involved in cross-borderproduction processes. It is basically a supply-driven process.

One indication of this is in the composition of intra-Asian trade,which is quite different from that of intra-European trade. Intra-Asian trade consists principally of intermediate goods—raw mate-rial inputs and components of one form or another—rather thanfinal goods, which is what has characterized much of intraregionaltrade in Europe both before the formation of EU and after.

It has been about vertical integration, with China playing akey part in this. The surge in intraregional trade in Asia has infact been shaped by China's integration into the world economy.Around China has been built a whole set of supply chains in dif-ferent industries that extend across Asia, including Japan, Korea,and Southeast Asia.

This means also that rising intraregional trade in Asia has notbeen a process of Asia increasingly looking inward. It has beenpart and parcel of Asia's integration with the rest of the worldeconomy. If you look at the last 10 years, 1995-2005, intra-regional trade within Asia doubled in volume, which is a verysubstantial expansion by any standard. But, at the same time,

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there was no change in the share of Asia's intraregional tradeto its total trade, because trade with the rest of the world ex-panded equally rapidly. So, over the past 10 years, the share hasremained at 50 percent—despite the doubling in the volume ofintraregional trade.

So it has been a bottom-up, supply-driven process, linked tothe manufacturing supply chain, which is increasingly centeredon China.

What next? How will this evolve?I think we are about to enter a whole new phase of growth

of intraregional trade in Asia, and, 20 years from now, it is a fairguess that we will have reached a position not very different fromEurope today. There are three reasons why I say this.

Three Factors Driving a New Phase of TradeIntegration in Asia

First, we are seeing now the start of a new phase of foreigndirect investment (FDI) inflows within Asia. There are several fac-tors behind this.

I start with Japan, which is still the largest Asian economy: atmarket exchange rates, which is what matters for internationaltrade and investment, Japan has the largest GDP in Asia by far,twice as large as that of China. Japan has seen a recovery of cor-porate profitability and a recovery in the financial position of itsbanks. It is a healthier economy. And the fundamental transfor-mation in Japan that took place in the 1990s, which was haltedfor some years, is now likely to pick up pace: the shift frommanufacturing to research, and design-driven production, andto services. This will mean a decanting of manufacturing opera-tions, particularly many forms of mass manufacturing that are stilllocated within Japan, out of the country, with major implicationsfor Asia. Take Japan today and compare it with the United States.Twenty-four percent of Japan's GDP is still in manufacturing,whereas for the United States, the proportion has fallen to 14percent. Japan has 18 percent of employment in manufacturing,compared with 10 percent for the United States. In both countries,these shares have declined over time, with Japan typically about15 years behind the United States. And I think Japan is going tocontinue to move in that direction. It may not reach U.S. levels,

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but it is going to continue to decant manufacturing offshore. Thenumbers that we are talking about are very large.

The Economist Intelligence Unit (EIU) estimates that the stockof Japanese FDI abroad will increase by 65 percent in the nextfive years. Historically, about one-third of Japanese investmentabroad has gone to other countries in Asia. We can expect atleast one-third of the increase in the stock of Japanese invest-ment in the next five years and beyond going to the rest of Asia.But it will not be only a China story. Japanese firms have alreadysignificantly stocked up on their investments in China. They hadbeen underinvested in China. Their subsequent investments inChina have corrected for this, and they are now no longer under-invested in China. So, going forward, for fresh flows of JapaneseFDI, we can expect to see a more diversified set of locations—notjust China, but Southeast Asia and India as well, that is, a morediversified approach covering the whole of Asia. And with thatwill emerge new supply chains like what we have seen in themotor industry in Southeast Asia, but extending to a whole set ofother industries.

Next, besides Japan, we are now seeing the start of a wave ofoutbound FDI from other Asian countries that we have not seenbefore: in particular, from China and India, which will be themajor new players in the next 20 years. Chinese and Indian firmsare substantial players that are now looking across Asia for newmarkets as well as new sites for production, much as the Westernand Japanese multinationals did in an earlier era. And this, too—whether it is Tata Steel or Hua Wei, or a whole new set of firmscoming out of these two large megaplayers—this too is going tolead to increased intraregional trade.

The second factor that is propitious to the growth of intrare-gional trade is the fact that the middle class is now coming into itsown in Asia. It is already large, but it is now growing much fasterthan GDP. By some estimates, by 2010, we will have a middleclass of about 650 million people in China, India, and SoutheastAsia. That is about 75 percent growth in five years, which willmean a tremendous escalation of demand for things that youcannot obtain at home. They will want imported products, whichdifferentiate themselves from the others. This is going to spur awhole new growth of imports, not just from within Asia. Therewill be an expansion of Asia's demand for the world's exports.

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The Asian supply chain will increasingly be oriented not just tothe United States and Europe but also to Asian final demand aswell. This is a new phase in intraregional trade.

The third factor is the broadening of free trade agreements(FTAs). The momentum of FTAs in Asia is growing. The Asso-ciation of Southeast Asian Nations (ASEAN) was a leader, andASEAN has now set itself a more ambitious target of achievingan ASEAN Economic Community by 2015—with a free flow ofgoods, services, investments, and skilled people within the Com-munity. ASEAN is also negotiating with China and India to haveFTAs with those two megaeconomies.

What started as bilateral deals have cascaded into regional FTAsand can eventually support multilateral trade liberalization. It isa cascading process which tends to be a little messy and somesay carries the risk of having a "spaghetti bowl" or "noodle bowl"effect. But I would say, better a bowl full of noodles than anempty bowl. Better that we create the momentum and the po-litical economy that favor reform in each of these economiesthrough bilateral and regional FTAs. That can only be propitiousto multilateral trade liberalization.

So this process of FTAs, starting with bilaterals, moving on toregionals and then cross-regional FTAs, is itself going to spurintraregional trade in Asia. This is another reason why I say weare very likely to get to at least 60 percent of Asian trade beingintraregional within 10 years.

A resurgence of intraregional investment and the growing do-mestic demand spurred by a rapidly expanding middle class willlead to an expansion of intraregional trade, aided and abetted byFTAs that reduce barriers to trade within the region. It is essentiallya bottom-up process, aided top-down. With or without monetaryunion, we are likely to get heightened intraregional trade.

URGENCY OF ASIAN FINANCIAL INTEGRATION

Next, I shall talk about financial market integration—becausethis too is an important reason behind proposals for a commoncurrency. This is where Asia has lagged, as we all know. Financialmarket integration has lagged substantially behind trade integra-tion, and this is why Asian saving surpluses are intermediatedlargely through financial markets outside Asia.



The reasons are also well known. Asian financial markets out-side Tokyo are mostly small and illiquid. Bond markets are espe-cially underdeveloped, although government bond markets acrossthe region are now in better shape than they were five or six yearsago. However, by and large, the secondary markets for governmentbonds with maturities beyond five years are not liquid, so there isa lot more work to be done. The corporate bond market is at afledgling stage. It is more developed in countries like Malaysia andSingapore, where it represents about 40 percent of GDP but, oth-erwise, in Asia at large, this is the big opportunity for reform anddevelopment in financial markets. My colleagues and I have beenspeaking about this at other fora, so I will not elaborate here.

Equity markets are more developed but they also are frag-mented and less liquid than those in the industrial countries.Market turnover or velocity ratios are generally lower than inthe United States or Europe. As a result, Asian equity investors,by and large, have looked elsewhere. They have looked outsideAsia to invest surplus funds and to diversify their portfolios. Infact, only 12 percent of the foreign portfolios of Asian investorsare invested within Asia itself. Compare that with the EuropeanUnion, where about two-thirds of the foreign portfolios of Euro-pean investors are invested within the EU.

The situation will evolve. It will evolve especially as exchangerates become more flexible so that surplus savings in Asia arenot principally held in the form of official foreign reserves but,increasingly, in the form of private holdings of foreign assets.

It will also evolve through collaborative efforts to developthe capital markets in Asia. This is something that cannot beleft to the markets alone, because capital market developmentrequires public goods to be in place. It requires governmentsto act, first, to adopt international standards of disclosure andinternational accounting standards, and, second, to provide har-monized rules and regulations across Asia to increase accessand reduce costs for investors. We are working on these issuesin several fora, including the Executives' Meeting of East Asia-Pacific Central Banks (EMEAP), ASEAN, and ASEAN+3 (ASEANplus Japan, China, and Korea). There is clearly a lot more workto be done.

We also have to set in place the infrastructure that is requiredfor capital markets to be integrated. There is presently no work-

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ing cross-border clearing or settlement system in Asia for eitherthe fixed-income or equity markets. It is virtually nonexistent.This is again something which all of us are working on—theAsian Development Bank and various regional fora. We needsome urgency in this process of putting in place the infrastructureas well as the rules and regulations to encourage greater cross-border flow of funds.

Easing Capital Restrictions

It will also require an easing of capital controls and restrictionsin Asia. We know that sequencing is important. We know that thepace at which you ease capital controls and lift them has to beshaped by prudential considerations and linked to financial stabil-ity, particularly of the banking system. But the direction has to beclear and we cannot afford to be too slow in this process.

Asian policymakers have to address the trade-off that we havealways faced: the trade-off between wanting to avoid the volatil-ity that comes with freer capital mobility, on the one hand, andwanting and needing greater liquidity in our markets, on theother. We will not have more liquid markets without a freer flowof capital, both from within the region and from global markets.And everyone wants liquidity—not just short-term investors or al-ternative fund managers but also long-term investors, who prefermore liquid markets so that they can exit without paying a highprice. So what is in the interests of short-term investors is also byand large in the interests of long-term investors.

We have to pay careful attention to sequencing. But we cannotbe too slow in lifting capital controls and restrictions in the regionif we want to develop healthier and deeper financial markets.

We should aim for a seamless flow of trading, clearing, and settle-ment across the debt and equity markets in Asia. But the outcome ofthis will not, I think, be what you see happening in Europe, whereyou have an extremely heavy concentration of financial activityin one financial center, that is, London, with a number of smaller,satellite financial centers outside London. In Asia, I can see, for along time to come, vibrancy in several centers: Tokyo, by virtueof the enormous hinterland around it provided by the Japaneseeconomy; Shanghai too, increasingly servicing a large domestic hin-terland; Mumbai coming up and eventually occupying the same


THARMAN SHANMUGARATNAM 11

place; the international financial centers, namely, Hong Kong andSingapore, each having distinct niches, competing with each other,but also complementing each other; and other domestic financialcenters—Kuala Lumpur, Bangkok, Jakarta—some of which will alsohave international niches, like Kuala Lumpur in Islamic finance.

Therefore, I see competition and complementarity in this emerg-ing set of financial centers across Asia—not the London effect.

ASIAN MONETARY INTEGRATION: A WAY FORWARD

What do these developments mean for Asian monetary integration?The debate over Asian monetary integration is now about

whether a common currency or some system of coordinationof exchange rate policy across Asia can foster enhanced intra-regional trade, investment, and financial flows. There is a decenteconomic case for expecting that it would. Most of the economicstudies of such currency unions provide evidence that either acommon currency or some formal arrangement to link currencieswith each other will be advantageous to intraregional trade andfinancial flows. In the European case especially, it is clear thatthe development of financial markets and cross-Europe financialflows have been spurred by the introduction of the euro.

Put simply, the European experience involved a schema whereeconomic integration started principally with trade, then movedon to monetary integration. A single currency, in turn, spurredgreater financial integration and reinforced trade integration. Thequestion is whether this European schema is relevant or appropri-ate for Asia. I would argue that it is not.

Why the European Schema Is Not Appropriate for Asia

The fundamental issue for policymakers concerns the trade-off be-tween the benefits of having a common currency, which arise princi-pally from enhanced trade and financial integration, and the costs oflosing autonomy over domestic monetary policy—that is, losing theability to adjust either your exchange rate or domestic interest ratesin response to your own economic cycle. This is the basic trade-offthat Asian policymakers inevitably face when they ask themselvesif a single currency, or any other form of monetary integration, willenhance economic growth and the welfare of their citizens.



Are Asian countries prepared to lose their ability to use theexchange rate as a shock absorber in certain circumstances? Arethey willing to lose the ability to adjust interest rates to respondto economic cycles? And is nominal convergence a necessaryprerequisite in Asia for real economic convergence—for achiev-ing a greater commonality of economic cycles in countriesacross the region and achieving over time a convergence in realincomes?

Even in Europe, this question is still being played out. Theseare still early days in the experience of the euro zone, but theevidence so far is that nominal convergence has not led to a nar-rowing of real economic differences. Some argue that nominalconvergence has accentuated real economic divergences becauseof the loss of flexibility on the part of national policymakers touse monetary policy as a buffer or mechanism for adjustment inresponse to economic shocks.

Asia will face a more challenging task than Europe in ensur-ing that the costs of monetary integration do not outweigh itsbenefits. First, because economic disparities in Asia are widerthan in Europe—far wider. In Europe, disparities in per capitaincome across countries are something in the order of 3 or 4 to 1;meaning that the richest economy, in terms of per capita income,is about three to four times richer than the poorest within thegroup. In Asia, the ratio is about 50-100 to 1.

What this also means is that we are likely to see, for a verylong time to come, a large difference in growth rates betweenAsian economies with low per capita GDPs that are catching upand transforming themselves, like China and some of the ASEANeconomies, and the more mature, higher-income, slower-growingAsian economies. This will likely mean different paths for theirreal effective exchange rates as well.

Second, economic structures in Asia are very different. We haveeconomies that are governed by advanced technology and ser-vices, economies that are largely agrarian, and economies wheremass manufacturing is the driver of growth. So these are verydifferent economic structures, even with a high overall degreeof intraregional trade. The shocks that Asian economies face andtheir response to shocks will therefore often be asymmetric. Thismakes exchange rate coordination a tricky task, even under thefavorable conditions.



Third, there is a lack of a suitable anchor player. In the 40years of transition to a common currency in the euro zone, thefirst 15 years involved pegging to the U.S. dollar while the last25 years really involved de facto pegging to the deutsche mark.How this became possible can only be explained by events andexperiences specific to European history—a history that broughta Germany that had gone through hyperinflation to be totallycommitted to low and stable inflation, and whose post-war so-cial compact gave the Bundesbank the independence to pursuemonetary policy with that singular objective. Further, becauseGermany was by far the largest economy in the Europe of the lastquarter century and the divergences between Germany's circum-stances and the rest were not so wide, most European countrieswere willing to commit themselves to following the Bundesbank.That is how they made this transition to a single currency, over25 years—and even then with considerable stresses and strains inthe union along the way.

Asia does not have the equivalent of a Germany to anchorthe transition. Japan, currently the largest economy, has thelow inflation preferences required of an anchor country. ButJapan is very different from the other economies for reasonsI have mentioned—different growth profile, different economicstructure, different shocks affecting it, different responses toshocks. And Asia lacks, very obviously, the political history thatbrought the leading European countries together to decide thatas a matter of political imperative, a union was preferable toany other outcome. Asia lacks that.

Will China—which will eventually be the largest Asian economy—play the role of a Germany? This is hard to envisage. China, for thenext 20 or 30 years, will be an economy going through major trans-formation. It is still a principally agrarian society. No one can predictexactly how China will unfold. But an economy going through majorstructural transformations cannot play the role of anchor. Further, itwill take some time before China itself can have an efficient mon-etary policy transmission mechanism.

So we do not have the advantage that Europe had in making thedifficult transition from having different national currencies to a com-mon currency by following a de facto leader in the deutsche mark.

Asia's strength lies in its diversity. This diversity is what makesintraregional trade an attractive and compelling economic propo-



sition. This diversity can also help in the diversification of financialportfolios across Asia. But, it is this same diversity that militatesagainst monetary integration, because it raises its costs, includingthe risks of destabilization arising from monetary union.

Intermediate Proposals for Asian Monetary Integration

If a common currency or monetary union is therefore not vi-able, are there alternative intermediate proposals that are worthconsidering? Several proposals have been made. Broadly speak-ing, they fall into two sets.

The first is the idea of a currency basket—for Asian countries tomanage their own currencies against a common basket throughsome form of a coordinated, managed float system. This com-mon currency basket system would serve to constrain monetarypolicy and exchange rate policy independence among the mem-ber countries. Each of us would use the same currency basketas the benchmark, and adopt some form of a peg or managedfloat against this basket: possibly a band with a center point, withsome flexibility in terms of the crawl of this band, but essentiallyde facto fixing against a common currency basket.

This is an appealing idea, but it would face great challenges oftransition. With freer capital movements—which are essential ifwe want trade and financial integration—and our divergent eco-nomic circumstances in Asia, it would be especially challengingto sustain a system equivalent to the exchange rate mechanism(ERM) or the snake in Europe for a period of years. Even the ERMfaced tremendous stresses along the way, requiring great politicalcommitment to the eventual goal of achieving monetary union, tosee them through. Asia does not have the same political impera-tive. So the strains and stresses arising from a coordinated systemof pegs or managed floats against a common currency basket willnot only risk destabilizing monetary integration but could alsoerode confidence in the larger game of Asian integration in tradeand finance.

The second set of proposals involves establishing a parallel cur-rency—an ACU or Asian Currency Unit, just like the former Eu-ropean Currency Unit (ECU). Some of the proponents of an ACUwill make it very clear that this is not a transition to a commoncurrency: the proposal is merely for the setting up of a parallel



currency, that is, a unit of account that could be used in the settle-ment of cross-border trade, or by financial institutions as a currencyof denomination for bonds and other financial instruments. It willbe a market-driven process with no obligation on the part of thenational monetary authorities to peg their currencies to the ACU. Itis a parallel benchmark of sorts.

I think this is worth considering, particularly if it can promote thedebt market in Asia and help develop the regional capital market. Itis not in any sense a scheme for monetary integration: there wouldremain national currencies with national monetary policies. I see itas a scheme for financial integration. It would be useful to havea currency of denomination that is widely accepted across Asia forbonds and other instruments: this is something we can explore.

But most proponents, like Barry Eichengreen, also agree thatit will be a very slow process for an ACU, or any parallel cur-rency, to be accepted by the market. Even in Europe, before theadvent of the euro, the ECU never really took off as a currencyof denomination, whether for financial assets and instruments orfor trade. It never really displaced national currencies before theeuro actually came into being.

If that was the case in Europe, it is all the more likely to betrue in Asia. I would say that we can explore this idea, particu-larly if we can use a parallel currency to spur the development offinancial markets, but it is not a scheme that takes us in the direc-tion of monetary integration as such. And, as some have pointedout, too, prudential supervisors will also want to make sure thatfinancial institutions, particularly banks, when using an ACU as acurrency of denomination for loans or other assets, will not facecurrency mismatches vis-a-vis their national currencies, whichhave typically been the currencies of denomination of banks'liabilities. So prudential supervision is also likely to hinder theadvancement of an ACU.

So an ACU is not a bad idea, but it is not intrinsic to the largerargument of whether we need Asian monetary integration orsome form of coordination of national currency movements.

Toward De Facto Monetary Policy Coordination

What, then, is the alternative? I think the alternative is whatwe are already seeing unfold before us. First, Asian exchange



rates have now become a lot more flexible, compared with theperiod before the Asian crisis. To be sure, we are not all rush-ing toward freely floating exchange rates; in fact, apart fromthe yen, I do not think there is any other truly freely floatingexchange rate in Asia today. But the majority of Asian currenciesare now in some form of a managed float, with varying degreesof fixity or flexibility. We are all mostly operating a managedfloat system, that is, an intermediate solution. That is the firstdevelopment.

Second, there has been increasing adherence to inflation tar-geting, or commitments to low and stable inflation as the objec-tive of monetary policy. We see this across the region. Althoughthe inflation thresholds may differ, the thresholds are all comingdown. There is increasing clarity and conviction that the objectiveof monetary policy is to maintain low and stable inflation.

The combination of these two developments—the shift towardmanaged floats and the shift in the objective of monetary policytoward low and stable inflation—has brought about, de facto, acertain degree of coordination in monetary policy across Asia.Indeed, if you look at the correlation of Asian exchange ratesover the past six years, that is, 2000-06, compared to the yearsbefore the crisis, 1990-96, the correlation for the recent periodhas been much higher despite the move toward greater currencyflexibility.

I think this de facto monetary policy coordination—not top-down, but obtained because national authorities find it in theirown interests to move in this direction—is not a bad way to go.It preserves flexibility when required. It allows secular trends ineffective exchange rates to diverge over time to reflect the verydifferent rates of productivity growth and the different transfor-mations we are going to see among economies in Asia.

And it retains the agenda for change as a national agenda. Anytop-down process, any process that is overly coordinated in Asia—by a committee or body outside of the national authorities—willnot incentivize politicians to take ownership of change. The futureof Asia is about change and reform in almost every sphere, requir-ing great political effort to convince populations, convince banks,convince firms, to move, to open up, to shake out the inertia. Andunless national politicians and authorities feel that they own theagenda, change is going to be difficult.



This process that we are seeing—market-driven, national author-ities responding to their own economic circumstances—leading,de facto, to increased monetary coordination is, I think, the bestway to go.

CONCLUSION: KEEPING THE GEOMETRY OPEN

Let me conclude.Intra-Asian trade has come a long way and has more potential

yet. The FTAs that we are working on now across the region willfoster its growth, but it is essentially a market-driven process.Market forces are going to take it further. Financial market inte-gration has been progressing more slowly, and there is a lot morework to be done—it deserves greater urgency.

These are the big projects, the welfare-enhancing projects—trade integration and financial integration. These are the projectsthat will deepen liquidity and lower the cost of capital, spurinvestment, raise growth, and lower unemployment, which arethe objectives of Asian policymakers. And they are founded, ulti-mately, on the diversity that we see in Asia. This same diversity iswhat will constrain monetary integration, and even the transitionto any form of monetary integration.

The present path toward de facto monetary coordinationis therefore, in my opinion, superior to any scheme of formalcoordination.

Will it be necessary to have a scheme of formal coordinationat some point in the future? I don't know. We need not rule itout, but the case is not compelling as it stands. The case is notcompelling to move from de facto coordination toward a moreformalized arrangement of exchange rate coordination.

We will only know in 20 years' time what the new Asia will looklike. We will only know what happens to China, India, Japan, andSoutheast Asia, and what the interactions will be between them,as we go along. This is a continent in transformation, and thatmeans that we should not fix the geometry too early, whetherin trade or in finance or in monetary integration. And monetaryintegration sends very strong signals on what the geometry is. Weshould keep the geometry fluid, keep it open, keep it lookingoutward. That is what has gotten us to where we are today, andremains crucially relevant for tomorrow.



Japanese economists such as Kojima used the metaphor of "fly-ing wild geese" ("ganko keitai"} to describe the phenomenon ofAsian industrial development through regional economic integra-tion. Japan, at that time a leader, passed down technology andknow-how to the NIEs [newly industrialized economies], whichin turn passed it on to the Southeast Asian countries in a processof collective catch-up. It was a scheme that described the linksand interdependencies between the Asian countries and how weride on each other's strengths. It was a good description of Asiain the 70s and '80s. It may be too structured, too hierarchical todescribe the Asia that is now evolving. But it is not a bad wayto look at Asia going forward, if we see flexibility in the arrange-ment and constant leap-frogging, yet all countries moving up intandem.

Asia need not be defensive about not following the Europeanpath of top-down integration. We should celebrate the fact thatAsia has got where it is through bottom-up, market-driven efforts.Keep it open, keep it fluid, and avoid doing anything that leadsto a tripolar world.

Thank you very much.


Appendix: Supporting Data

Table 1. Intraregional Exports(In billions of U.S. dollars)

1980199020002005

Intraregionalexports

97288791

1,390

Asia-11*Total

exports

281721

1,7002,792

Intraregional exports asshare of total exports (%)

34404750

Sources: CEIC database; and IMF, Direction of Trade Statistics (CD-ROM).*Asia-11 comprises ASEAN-5, Taiwan Province of China, Korea, Hong Kong SAR, China, India, and Japan.

Table 2. Export Destinations of Various Trading Blocs, 2005

Asia-11NAFTAEU-15

100100100

50177

215410

151461

Sources: CEIC database; and IMF, Direction of Trade Statistics (CD-ROM).*Asia-11 comprises ASEAN-5, Taiwan Province of China, Korea, Hong Kong SAR, China, India, and Japan.

Table 3. Standard Deviations of Monthly Exchange RateFluctuations Against the U.S. Dollar

(In percent)

Indonesian rupiahThai bahtJapanese yenKorean wonMalaysian ringgitPhilippine pesoSingapore dollarTaiwan dollar

0.450.723.220.931.322.180.861.11

4.041.782.752.190.331.991.251.27

Sources: Bloomberg; and Monetary Authority of Singapore.

19

Total Exports(% share)

Export DestinationsAsia- 11* NAFTA

(%)EU-15

January 1990-June 1997Pre-Crisis

January 2000-August 2006Post-Crisis



Table 4. Average Correlations of Currencies with Increasing Flexibility

January 1990-June 1997Pre-Crisis

January 2000-August 2006Post-Crisis

New Asian flexiblecurrencies* 0.10 0.40

Sources: Bloomberg; and Monetary Authority of Singapore.*Philippine peso, Thai baht, Korean won, Indonesian rupiah, and new Taiwan dollar.

Figure 1. Intraregional Exports as Shareof Total Exports

(In percent)

Sources: CEIC database; and IMF, Direction of Trade Statistics (CD-ROM).* Asia-11 comprises ASEAN-5, Taiwan Province of China, Korea, Hong Kong SAR,China, India, and Japan.


Questions and Answers

ANDREW CROCKETT: Thank you, Tharman, for that very inter-esting and illuminating lecture. We have time for some questions.Before turning to questions from the floor, perhaps while peopleare writing down their questions to pass up or thinking aboutthem, may I take the privilege to ask the first question?

You made a persuasive case, Tharman, that countries shouldhave flexibility to pursue the exchange rate and interest ratepolicies that best suit their circumstances. How significant do youthink the danger is that, in doing so, you may create tensionswith other trading partner countries, perhaps within the region,or maybe even especially if the region is coordinated, that youmay create a pattern of payments imbalances that provokes reac-tions from abroad? I am thinking, of course, of the situation nowwhere many Asian countries semicoordinate their exchange ratepolicies but generate very substantial surpluses, which lead, atleast at the political level, to a certain amount of noise from therest of the world.

THARMAN SHANMUGARATNAM: I think that's a very importantquestion. It is one of the weaknesses of the present situation thatthere is no immediate check on countries that want to run ex-change policies that are effectively "beggar thy neighbor" policiesaimed at short-term competitive gain.

But the situation is not one where these policies can be sus-tained for long, because each economy that runs, say, an under-valued exchange rate, faces its own problems within a matterof time—typically, the problems of excess liquidity, leading todistortions in their own economy. I believe too that policymakersare increasingly aware, through multilateral surveillance, throughthe advice we get from the ADB, the IMF, and others—they areincreasingly aware of these problems.

21



There is a much stronger consensus in Asia now on goodpolicy, good monetary and exchange rate policy, than there usedto be before the Crisis. So, I would argue that Asian countries willrealize that it is in their self-interest not to pursue currency poli-cies aimed at the short term but to pursue currency policies thatare aimed at a secular path that reflects the underlying fundamen-tals of their economies.

The current imbalances are not satisfactory for Asia—not justfor the United States and others.

ANDREW CROCKETT: Thank you very much. Let's turn to the floor.

Question: My question is related to the accumulation of huge for-eign exchange reserves in Asia. How do you view this huge accu-mulation of foreign exchange reserves, with a huge portion in U.S.dollars, in relation to the exchange rate policies and respectiveeconomic interests of the countries concerned?

THARMAN SHANMUGARATNAM: Well, that's a very large ques-tion that in fact has been discussed at several fora during theseIMF and World Bank Meetings. Let me say very briefly that it isnot just a question of exchange rate policy but fundamentally aquestion of savings and investment imbalances. And if we look atthe sources of savings-investment imbalances in Asia—in China, inSoutheast Asia—they suggest that a very complex set of structuralissues are in play, such as Chinese consumption, with savingsrates high and consumption low, being shaped by social securitysystems that are not fully developed. Why are Southeast Asianinvestment rates not as high as we would like? Again, the issuesare structural—uncertain labor laws, the need for further reformsin the business environment and in financial supervision—theseare some of the concerns that policymakers are working at.

I would say we should look past the external imbalances, lookat the causes in savings and investment flows, and address solu-tions to those causes.

ANDREW CROCKETT: Thank you. I have a question from thefloor here, a written question, which goes as follows: "You arguefor an endogenous monetary integration process. What prospectsdo you give for a formalized top-down economic and monetary



integration process for Asia and other pans of the world? Do yourule out success for such a process?"

THARMAN SHANMUGARATNAM: Well, that is my whole talk, butas I concluded, we should always stay pragmatic in Asia. Neverrule out a solution. The case is now not compelling, and I thinkthe de facto evolution of Asian monetary regimes has been onethat will allow us to get quite far in achieving our real objectives.We should always remember that our objective is not monetaryintegration. Our objective is trade and financial market integration.

NAFTA is a very interesting parallel for us to look at—Canada,the United States, and Mexico—all with floating exchange rates.They don't fix their exchange rates. There is a very high degreeof trade integration, a high degree of financial integration, a highdegree of cross-border FDI. Economic growth there has gone upby most measures. It has not required currency fixity.

I think that Asia will require more management of its exchangerates—we cannot let them be completely free floating—but theexperience of NAFTA is, I think, more instructive than the experi-ence of the EU for Asia.

Question: Singapore has the highest-value circulating banknote inthe world—the 10,000 dollar note, which shows a woman scientistat her computer. Some 40 years ago, a film was made, I think withGregory Peck, on his amusing efforts to spend or get change froma million pound note. Regarding Asian monetary integration orde facto cooperation, is there any plan to film a distinguishedactress going around to banks and exchange offices in Tokyo,Shanghai, Mumbai, and Jakarta to demonstrate how rich Asiansalready are, without the need to introduce a common Asian mil-lion dollar note?

THARMAN SHANMUGARATNAM: Well, we will add this to the listof proposals for Asian monetary integration.

Question: At what pace and by what method do you think Indiashould move toward greater convertibility of its own currency?

THARMAN SHANMUGARATNAM: Well, that is a very dangerousquestion to ask a minister in another government, and I would



not want to comment on India's priorities. There is, however,increasing sense among financial market players in India, andindeed the Prime Minister himself, that there is an opportunityfor India to make Mumbai a true financial center. And that thiswill only occur if they go through a process of gradual removalof capital controls and restrictions. I doubt it will happen quickly,judging from the debate that is taking place right now, but if youtake a 20-year view, whether it is about India or China, I think allcountries, large and small, will see it in their own interests to tryto achieve a freer flow of capital.

We are not purists, we are not ideologues, and we shouldnever be. Let's do what is in our interests, and if it means movingtoward freer capital mobility, let's do it intelligently, in steps.

Question: Minister Shanmugaratnam, I think your comparison ofthe evolution of integration in Europe and Asia provided a numberof insights, which certainly made a compelling case for your con-clusion that perhaps de facto financial coordination is probablythe best outcome. But in terms of having a completeness in terms ofthe analysis, I wonder whether it would be instructive to look at theU.S. economy—not NAFTA, but just the U.S. economy. Historically,convergence or lack of it has been a problem for the United States aswell, but there have been two stabilizing phenomena. One has beenthe high level of mobility of labor from the lagging areas to the moredynamic areas and the second has been the political will for large-scale fiscal transfers, again from the dynamic areas to the reallylagging areas. So there can be stabilizers that can change the priorconditions. If there is a political will to move to Asian integrationand if one comes to the conclusion that one can reduce the trade-offthrough these two measures; that is, you can reduce the trade-offsand make the objective of moving more quickly to monetary inte-gration more realizable.

THARMAN SHANMUGARATNAM: I think that is a relevant economiccomparison, but I don't see how Asia, with independent sovereignstates, will ever be able to contemplate that. The European andNAFTA examples are very useful ones for us to study. In Europe,there was a political imperative, which doesn't exist in Asia. And Ithink we should avoid thinking that we need to do something dra-matically different from what is already happening in our markets



and through our own actions so far in order to achieve our objec-tives of higher growth, lower unemployment, and low inflation.

The current situation is already moving in that direction—thecurrent situation of de facto monetary coordination.

Question: Tharman, you seemed to suggest in your speech that acombination of floating and some kind of domestic anchor like in-flation targeting was an effective framework for Asian countries,both for macroeconomic stabilization and for development. And Iguess my question is: do you see any downside to this? I am think-ing particularly of the case of the Reserve Bank of New Zealand,which actually invented the framework and which itself is actu-ally questioning this framework.

THARMAN SHANMUGARATNAM: I would simply say that it isthe lowest-risk and lowest-cost alternative that we have. It is notoptimal in every sense. In particular, it will not help to spur thedevelopment of an Asian financial market—a common, unifiedbond market, for instance—the way that it happened in Europe.But given the diversity of Asia, given the costs of surrenderingmonetary policy autonomy of national economies, I see it as thelowest-risk path that we have.

Question: I enjoyed your presentation very much. With regard tothe intermediate regime option, my impression is that you raisedthree options. Singapore takes a son of a mixture of all threeoptions. Singapore has a monetary policy based on a managedfloat—an exchange-rate-based monetary policy—while payingsome attention to inflation, but not formal, rigid, inflation tar-geting. The managed float is against a basket of currency, andthe basket includes not only major global currencies but regionalcurrencies as well. In a sense, my impression is that what you areproposing for other Asian currencies is something like Singapore'sexchange rate arrangement. I'm not sure if I understand yourpresentation perfectly.

THARMAN SHANMUGARATNAM: Well, that is not the way I wouldput it. [Laughter.] But it is the way it is happening, quite indepen-dently of Singapore's designs. In fact, I think this de facto solutionthat is happening before us will increasingly converge on what



some of the proponents of monetary integration want, because withincreasing trade integration in the region, increasing commonalitiesof interest, increasingly facing the same economic cycles as a resultof trade integration, the weights in each of our baskets that we usefor a managed float will tend to converge. They will never be identi-cal, but they will converge. And Asian currencies' weights in eachother's baskets will also go up. So by virtue of that, I think we willget an increasing degree of stability among Asian currencies. But itwill still preserve the flexibility needed when a shock does happen:both the markets and the authorities will have that ability to adjustthe currency, and I think that's a very useful adjustment mechanismto preserve.

Question: That was a terrific analysis. One school of thought isin favor of monetary integration without reference to the politicaland social context. As we saw in Argentina, that can create chaos.But what can we learn from that for the euro? The euro is still avery young phenomenon. How can we ensure that social diversifi-cation in Europe cannot derail that?

THARMAN SHANMUGARATNAM: I think there are some thingsto be learned from Europe, particularly about financial market in-tegration. The procedures they have set in place for cross-bordersupervision, the procedures they have set in place to harmonizerules and regulations for the capital markets, the greater institu-tionalization of what in Asia is still a very informal process ofconsultation and surveillance—these are important lessons thatAsia can learn from Europe.

Question: Can I just add one further thing to your comparisonbetween Asia and Europe and ask you to comment on it? Untilnow, the European Monetary Union has consisted, with one ortwo exceptions, of well-run, mature economies. But there are nowwaiting on the eastern wing of Europe somewhere approaching10 emerging market economies, standing in line for what looks tomany observing it to be a very difficult process indeed of cominginto membership. On the one hand, they are emerging marketswhich, as you have said, have extremely low costs into which thereis vast FDI, generating very large booms which may need quitedifferent monetary restraint from core Europe. On the other hand,



there is increasing financial integration, which is leading to cross-border borrowing, especially by households, which in some coun-tries is alarming.

I went to a seminar in Frankfurt given by the head of the cen-tral bank in Hungary who gave a fascinating presentation atwhich I stood up and said this sounded to me rather like Thailandbetween 1994 and 1997-—not to the amusement of many peoplein the room. I wonder if you think that the point in Asia is thatthere are more emerging market economies with very great struc-tural changes yet to come than in the monetary union of coreEurope, and that this means that monetary union could not besustained?

THARMAN SHANMUGARATNAM: Yes, I think you have expressedthat point better than I did. I would add that we also want to pre-serve competition between social models. I think that is one ofAsia's strengths; that is part of Asia's vibrancy—the fact that therewill be competition between social models, and not an attempt toimpose a common social model on all Asian players.

ANDREW CROCKETT: Well, thank you very much, Tharman,and thank you to the audience. I think you have given us a verythoughtful analysis of what is a very topical subject and subjectedit to a degree of analytical rigor and historical perspective andsome practical common sense that enables us to see some of theperhaps glib solutions that are often advocated in a more realisticlight. So, let me ask the audience to join me in thanking you fora very spectacular lecture.




Tharman Shanmugaratnam

Tharman Shanmugaratnam is Minister for Education and Sec-ond Minister for Finance in the Singapore Cabinet.

Tharman spent much of his earlier professional career at theMonetary Authority of Singapore (MAS), Singapore's central bankand financial regulator, where he was the Managing Directorbefore he entered politics in 2001. He continues to serve on theBoard of MAS, and sits on the Board of the Government of Singa-pore Investment Corporation. He is also Deputy Chairman of theNational Research Foundation.

Tharman has been Member of Parliament since October 2001.After entering politics, he was appointed Senior Minister of State inthe Ministry of Trade and Industry and in the Ministry of Education.He took office as Acting Minister for Education in August 2003, andsubsequently as Minister for Education in August 2004. He was ap-pointed Minister for Education and Second Minister for Finance inMay 2006. Tharman is also Co-Chairman of the Singapore-LiaoningEconomic and Trade Council, which was established in 2003 toadvance stronger links between Singapore and Liaoning Province,China. He is Chairman of the Ong Teng Cheong Institute of LabourStudies, and serves as a Life Trustee of the Singapore Indian Devel-opment Association.

Tharman obtained undergraduate and masters degrees in econom-ics from the London School of Economics and Cambridge University.He later obtained a masters degree in public administration from Har-vard University, where he received the Littauer Fellow award. He wasawarded the Singapore Public Administration Gold Medal in 1999.

He is married to Jane Yumiko Ittogi, a lawyer.

29


The Per Jacobsson Lectures

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

1992

1991

1990

Asian Monetary Integration: Will It Ever Happen? Lecture by Tharman Shan-mugaratnam (Singapore).

Competition Policy and Monetary Policy. A Comparative Perspective. Lectureby Mario Monti (Bern).

International Financial Institutions: Dealing with New Global Challenges.Lecture by Michel Camdessus.

The U.S. Current Account Deficit and the Global Economy. Lecture by LawrenceH. Summers.

Some New Directions for Financial Stability? Lecture by C.A.E. Goodhart, CBE(Zurich).

The Arab World: Performance and Prospects. Lecture by Abdlatif YousefAl-Hamad (Dubai).

The Boom-Bust Capital Spending Cycle in the United States: Lessons Learned.Lecture by E. Gerald Corrigan.

Recent Emerging Market Crises: What Have We Learned? Lecture by GuillermoOrtiz (Basel).

No lecture took place due to the cancellation of the Annual Meetings of theIMF and the World Bank.

Ten Years On — Some Lessons from the Transition. Lecture by Josef Tosovsky(Prague).

Strengthening the Resilience of Financial Systems. Symposium panelists: PeterB. Kenen, Arminio Fraga, and Jacques de Larosiere (Lucerne).

The Past and Future of European Integration — A Central Banker's View.Lecture by Willem F. Duisenberg.

Managing the International Economy in the Age of Globalization. Lecture byPeter D. Sutherland.

Asian Monetary Cooperation. Lecture by Joseph C.K. Yam, CBE, JP (HongKong SAR).

Financing Development in a World of Private Capital Flows: The Challengefor International Financial Institutions in Working with the Private Sector.Lecture by Jacques de Larosiere.

Economic Transformation: The Tasks Still Ahead. Symposium panelists: JanSvejnar, Oleh Havrylyshyn, and Sergei K. Dubinin.

Central Banking in Transition. Lecture by Baron Alexandre Lamfalussy(London).

Capital Flows to Emerging Countries: Are They Sustainable? Lecture by Guillermode la Dehesa (Madrid).

Latin America: Economic and Social Transition to the Twenty-First Century.Lecture by Enrique V. Iglesias.

A New Monetary Order for Europe. Lecture by Karl Otto Pohl.

The Road to European Monetary Union: Lessons from the Bretton Woods Re-gime. Lecture by Alexander K. Swoboda (Basel).

Privatization: Financial Choices and Opportunities. Lecture by AmnuayViravan (Bangkok).

The Triumph of Central Banking? Lecture by Paul A. Volcker.

30


THE PER JACOBSSON LECTURES 31

1989

1988

1987

1986

1985

1984

1983

1982

1981

1980

1979

1978

1977

1976

1975

1974

1973

1972

1971

1970

1969

Promoting Successful Adjustment: The Experience of Ghana. Lecture byJ.L.S.Abbey.

Economic Restructuring in New Zealand Since 1984. Lecture by DavidCaygill.

The International Monetary System: The Next Twenty-Five Years. Symposiumpanelists: Sir Kit McMahon, Tommaso Padoa-Schioppa, and C. Fred Bergsten(Basel).

Interdependence: Vulnerability and Opportunity. Lecture by Sylvia Ostry.

The Emergence of Global Finance. Lecture by Yusuke Kashiwagi.

Do We Know Where We're Going? Lecture by Sir Jeremy Morse (Seoul).

Economic Nationalism and International Interdependence: The Global Costsof National Choices. Lecture by Peter G. Peterson.

Developing a New International Monetary System: A Long-Term View. Lectureby H. Johannes Witteveen.

Monetary Policy: Finding a Place to Stand. Lecture by Gerald K. Bouey(Toronto).

Central Banking with the Benefit of Hindsight. Lecture by Jelle Zijlstra; com-mentary by Albert Adomakoh.

Reflections on the International Monetary System. Lecture by GuillaumeGuindey; commentary by Charles A. Coombs (Basel).

The Anguish of Central Banking. Lecture by Arthur F. Burns; commentaries byMilutin Cirovic and Jacques J. Polak (Belgrade).

The International Capital Market and the International Monetary System.Lecture by Gabriel Hauge and Erik Hoffmeyer; commentary by Lord Roll ofIpsden.

The International Monetary System in Operation. Lectures by Wilfried Guthand Sir Arthur Lewis.

Why Banks Are Unpopular. Lecture by Guido Carli; commentary by MiltonGilbert (Basel).

Emerging Arrangements in International Payments: Public and Private. Lec-ture by Alfred Hayes; commentaries by Khodadad Farmanfarmaian, CarlosMassad, and Claudio Segre.

Steps to International Monetary Order. Lectures by Conrad J. Oort and PueyUngphakorn; commentaries by Saburo Okita and William McChesney Martin(Tokyo).

Inflation and the International Monetary System. Lecture by Otmar Emminger;commentaries by Adolf o Diz and Janos Fekete (Basel).

The Monetary Crisis of 1971: The Lessons to Be Learned. Lecture by Henry C.Wallich; commentaries by CJ. Morse and I.G. Patel.

International Capital Movements: Past, Present, Future. Lecture by Sir EricRoll; commentaries by Henry H. Fowler and Wilfried Guth.

Toward a World Central Bank? Lecture by William McChesney Martin; com-mentaries by Karl Blessing, Alfredo Machado Gomez, and Harry G. Johnson(Basel).

The Role of Monetary Gold over the Next Ten Years. Lecture by Alexandre Lam-falussy; commentaries by Wilfrid Baumgartner, Guido Carli, and L.K. Jha.


32 THE PER JACOBSSON LECTURES

1968

1967

1966

1965

1964

Central Banking and Economic Integration. Lecture by M.W. Holtrop; com-mentary by Lord Cromer (Stockholm).

Economic Development: The Banking Aspects. Lecture by David Rockefeller; com-mentaries by Felipe Herrera and Shigeo Horie (Rio de Janeiro).

The Role of the Central Banker Today. Lecture by Louis Rasminsky; commen-taries by Donato Menichella, Stefano Siglienti, Marcus Wallenberg, and FranzAschinger (Rome).

The Balance Between Monetary Policy and Other Instruments of EconomicPolicy in a Modern Society. Lectures by C.D. Deshmukh and Robert V.Roosa.

Economic Growth and Monetary Stability. Lectures by Maurice Frere andRodrigo Gomez (Basel).

The Per Jacobsson lectures are available on the Internet at www.perjacobsson.org, which also contains further information on the Foundation. Copies of the PerJacobsson lectures may be acquired without charge from the Secretary. Unless oth-erwise indicated, the lectures were delivered in Washington, D.C.




The Per Jacobsson Foundation

Founding Honorary Chairmen:

Past Chairmen:

Past Presidents:

Eugene R. BlackMarcus Wallenberg

W. Randolph BurgessWilliam McC. MartinSir Jeremy MorseJacques de Larosiere

Frank A. Southard, Jr.Jacques J. Polak

Hermann J. AbsRoger AuboinWilfrid BaumgartnerS. Clark BeiseB.M. BirlaRudolf BrinckmannLord CobboldMiguel CuadernoR.v. FieandtMaurice FrereE.C. FussellAly GritlyEugenio GudinGottfried Haberler

Founding Sponsors

Viscount HarcourtGabriel HaugeCarl Otto HenriquesM.W. HoltropShigeo HorieClarence E. HunterH.V.R. lengarKaoru InouyeAlbert E. JanssenRaffaele MattioliJJ. McElligottJohan MelanderDonate MenichellaEmmanuel Monick

Jean MonnetWalter MullerJuan Pardo HeerenFederico PinedoAbdul QadirSven RaabDavid RockefellerLord SalterPierre-Paul SchweitzerSamuel SchweizerAllan SproulWilhelm TeufensteinGraham TowersJoseph H. Willits

Board of Directors

Sir Andrew D. Crockett — Chairman of the Board

Abdlatif Y. Al-HamadNancy BirdsallMichel CamdessusE. Gerald CorriganRodrigo de RatoShigemitsu Sugisaki

Malcolm D. KnightHorst KohlerEdwin M. TrumanLeo Van HoutvenMarcus Wallenberg

Officers

Leo Van Houtven — PresidentGraham Hacche — Vice-President and SecretaryChris Hemus — Treasurer

33


Documents

Asian Monetary Integration - IMF eLibrary...Integration: Will It Ever Happen?" at the Marina Mandarin Hotel in Singapore on September 17. The event was jointly organized by the Per